Grant District Council Mayor Richard Sage says the region faces a tough time, but he thinks the timber industry will remain viable.

"It's very disappointing, it's going to be very hard on a lot of the companies in the region, especially those that have had contracts with a long period of time and we'll just have to wait and see what we can do to make sure everything goes OK," he said.

Gunns' assets in the south-east include forests and milling operations.

"We have grave concerns about the future of both the Tarpeena site and also the Bell Bay site in Tasmania," he said.

"We're looking at well over 250-odd employees at both sites who have been told today that their company is in administration and the receivers have been called in, which is a very worrying time for everybody."

The 200 workers at Tarpeena were told of Gunns' problems at a morning meeting and allowed to go home for the rest of the day.

Another Gunns operation at Kalangadoo is in the process of being sold.

At its peak eight years ago, Gunns employed 1,200 people in the south-east.

Support plan

SA Treasurer Jack Snelling said the State Government was investigating what could be done help protect the jobs at Tarpeena.

He said part of a $27 million taxpayer-funded package rejected by another timber company Carter Holt Harvey could be redirected to help the Gunns' workers.

"The Government's very mindful of the importance of the milling industry to the south-east we want to make sure those jobs are protected, so we're looking at a package basically of assistance we can offer to the industry down there, particularly given that Carter Holt Harvey have rejected our offer of assistance," he said.

Federal Regional Development Minister Simon Crean, who is visiting SA, said the south-east needed to look at diversifying its forestry industry.

Mr Crean thinks the announcement from Gunns is not all bad news.

"Look to the diversification of the economic base, it is a natural resource-rich region, it is fertile country, it has its own great strengths," he said.

"Just like my message here to all regions - understand your strength and turn it to competitive advantage, that's the challenge for all regions around the country."